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Comment by epistasis | Hacker News Reader

> And while many factors are at play—most notably, a giant influx of new residents and a shortage of housing—Berliners tend to see greedy landlords as the problem.

This is a much better direction to focus their anger than other residents, at least.

There's a lot of NIMBYism in all of us, and in SF that hatred of change has found a lot of people having the newcomers, rather than the landlords that set the prices, or the politicians that set the markets so that landlords have massively growing profits.

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When will people stop looking for scapegoats and start finding solutions? Needlessly high rents are an economics problem, and there's a lot of evidence that a combination of expanding housing supply and imposing a Land Value Tax would be an actual economic solution. You could have the most evil landlords, corrupt politicians, and aloof newcomers, and an economic solution would still fix the problem. Sometimes I wonder whether nobody cares to try and solve the problem, symbolic political wars being more urgent.

Only allow individuals to own, not companies. If you want to let a unit, rent control with rate increases permitted annually that peg to inflation. Mandatory reporting and regulation through the local housing authority.

That’s about all you can do if there’s no will to build but you don’t want corporate or private landlords gouging renters when demand outstrips supply. Life ain’t fair, everyone isn’t going to be able to live exactly where they want to. Scarcity leads to rationing.

Disclaimer: Landlord who charges reasonable rents and tries to upzone where I operate.

You're going to have major problems no matter what when there's demand and no political ability to build. A Land Value Tax can still in this situation put the landlord surplus back into city welfare/projects without raising rents.

The tax is unhelpful if it isn’t used to increase supply; it’s simply government rent seeking instead of landlord rent seeking.

So, no housing cooperatives?

Who raises the capital if an entire apartment building needs renovation?

A housing coop would work, but you’d have to have rigorous governance and oversight.

Individuals owning is what leads to political pressure to not build.

Discouraging individual ownership of housing is the way to affordable rent. Not encouraging it.

> You could have the most evil landlords, corrupt politicians, and aloof newcomers, and an economic solution would still fix the problem.

I wish more people understood this. We can’t build a world for people better than us. We have to build it for ourselves.

To be fair, a political solution would also fix the problem. So would a religious solution. Any solution would fix the problem - because the word "solution" implies that the problem has been fixed.

One problem is that people don't agree on what an economics-based solution should be. There have been any number of proposed economics-based solutions to other problems which have exacerbated the problem.

Let's take "expanding housing supply". What kind of housing? From https://www.independent.co.uk/voices/housing-crisis-london-h... :

> More than 500 high-rise developments are in progress across the city of London. For a nation in the grip of a housing crisis, this should be good news. But in reality, this will bring hardly any benefit for many of those seeking a decent home. Almost none of the new homes are reserved for people with no or low incomes and, although house prices in London are falling – particularly at the upper end of the market – construction for wealthy people and international buyers continues.

> Much of this building is actually intensifying the stress on the affordable housing market, as developers grab cheap land and resources that can be converted into expensive, for-profit housing construction.

And for land-value tax, well, see the criticism at https://en.wikipedia.org/wiki/Land_value_tax#Practical_issue... :

Several practical issues are involved in the implementation of a land value tax.

> Most notably, it must be: - Calculated fairly and accurately; - High enough to raise sufficient revenue without causing land abandonment; - Billed to the correct person or business entity

How is it calculated fairly in the face of "evil landlords [and] corrupt politicians"?

As far as I can tell, it is a myth that building high-income-targeting housing does not help, in aggregate, low-income earners. See the concept of filtering, which is well-studied and sees two effects:

1. middle-high-income households moving into more expensive units, middle-low-income into the space left over from that move, etc.

2. the slower effect of declining values from aging housing stock.

Okay, but you're still skeptical. I do honestly understand, you probably should be; I definitely don't regard myself as the best person to argue about these things. Knowing that, I should make a less ambitious case on this one and point out that "grabbing cheap land" for expensive construction is far better than letting it go empty and not contribute via taxes to the local government's coffers.

And yes, I'm aware of the criticism of LVT. But isn't it obvious? If we have politicians who are virtuous enough to enact an LVT, I think we've tunneled into an alternate reality operated by saints, so that just about resolves itself.

There are other downstream consequences.

Consider in a simple model two cities, A and Z, which are next to each other.

In A, the city focuses on high-end housing. It's successful. Rich people move to A. Rents go up on older housing, to meet the market demand, including the temptation to sell the plot, raze the structure, and build new high-end housing.

As a result, poorer people move to the more affordable Z. This is exactly what's predicted in your #1.

Since the expensive housing is in A, that city gets more tax money, which goes to schools, libraries, parks, etc.

Z doesn't have that revenue source, so ends up with worse quality schools, libraries, parks, etc.

The citizens of city A all have cars, and don't like all the non-residents coming through and using "their" libraries, parks, etc. so convert most streets to cul-de-sac versions and don't provide mass transit.

The citizens of Z, many with service worker jobs in A, must therefore buy cars in order to keep their jobs. Which lowers their overall income, and makes it harder to save up money.

Z responds by building more low-cost housing, but this is further away from A (where the jobs are), and doesn't address the unequal tax base.

> But isn't it obvious?

Well, yes. That is my point. I pointed out that if you assume you have a solution, then of course there's a solution. Remember, you argued "You could have the most evil landlords, corrupt politicians, and aloof newcomers, and an economic solution would still fix the problem." What economic solution is there if you have normal people? Not saints, and not demons.

Here's another downstream consequence, for London.

When a lot is converted to high-end apartments, the population density may go down. For example, what may have been an apartment house for 20 families (5 floors, 4 per floor) may be 10 or even 5. Or, as is the case in London, the apartment may be occupied only occasionally.

Neighborhood business often depend on local traffic. If there are fewer people, then there is less need for barbershops, and corner shops, and the like. Owners may need to quit, sell their property, and move elsewhere. These are stressful.

Grocery stores may switch to high-end/expensive foods.

As a result, the non-rich who live there have fewer options, and a lower quality of life.

Now, this may not be a problem for those who use economics to maximize "gross domestic product" or other easily measured value. But it may worsen, say, "Gross National Happiness."

Economics doesn't guide us on what to maximize. That's what politics does.

>How is it calculated fairly in the face of "evil landlords [and] corrupt politicians"?

Really? That part is trivial. In the US, your local municipality and/or county has very detailed data on each parcel of land. Occasionally, there is a data error, but if you have ever looked up your assessors records, they are pretty darn accurate. PLus, we all have readily accessible satellite data now.

Quoting the Wikipedia article I linked to, Assessment/appraisal is "still easily distorted by corrupt politicians through the excuse of the complex coding."

The scapegoating of NIMBY property owners is due to their use of political power to entrench their position, making economic solutions impossible/improbable. Can't do any expansion of housing supply or implement a land value tax when the political power is in the hands of the property owners.

Landlords don't set prices. They are price takers in the market just as much as tenants.

Landlords set the prices by preventing new construction that would lower their prices.

Uh, landlords don't control new construction. Government and NIMBYs do.

Landlords would gladly accept new development because... it would let them make more money?

Here in the UK we have a chronic issue with a lack of new housing developments, alongside issues like poor rental conditions. We also have a very strong "landlord lobby", and a sizeable proportion of landlords in the ruling party, which get in the way of fixing either issue because it means less return for landlords from the assets they currently own.

> Uh, landlords don't control new construction. Government and NIMBYs do

Well, government and highly engaged groups of voters exercise control in municipalities in Western democracies.

Landlords come in many stripes and some are local voters who hold land/property. These landlords are often NIMBYs, as any increase in supply of housing drives down the asset price of housing/land, which is to say their investments. MOst of these landlords aren't in the position to take advantage of liberalized zoning, as the are undercapitalized relative to the cost of land/construction. All of their financial eggs tend be in the basket of their existing property.

Larger landlords, or developers/real estate firms may well favor liberalized zoning as they profit from development. However, at the moment many voters hate developers, sometimes for good reasons.

In a sense, we're in a bit of a pickle.

Not necessarily, depends on which landlords, their access to capital and interest in / ability to obtain ownership over additional properties.

If you have a single rental property and no interest or ability in obtaining any additional, then you're going to make less money if new development increases supply and prices go down.

In a shortage, like Berlin's, the landlords have much more ability to set prices than the tenants do.

And in particular they now have the ability to set higher prices, which is the particular act that angers residents.

Prices are set by the Property Management Software SaaS that all landlords use. So it is a Cartel. That is why prices rise even in places where population drops and vacancies rise.

This can't be a surprise, vast swathes of the economy have fallen into virtual monopoly over that last few decades.

By the way, I think we can extrapolate candidate Bloomberg's (non)position on the housing issue here.

C'mon. Landlords are not a cartel. If a landlord can't fill a unit because renters won't pay what they ask, then they have every reason to lower the price until the unit is filled. Because some rent is better than no rent.

This theory is simply not correct, the market is broken. Even flint Michigan has lost 1/5 of it's population since 2000 and rent has still risen. Just show me some towns where the market works.

The use of that software has exactly the same outcome as a cartel but, understandably, few people want to acknowledge that even to themselves.

> they have every reason to lower the price until the unit is filled

That's the behaviour of the completely rational homo economicus which does not exist in real life. A certain amount of landlords of walk-in business space in Manhattan have a fixed price in their mind and will not go below, no matter what.

Wouldn't it be likely for another more rational landlord to exploit that opportunity then? Or are there some barriers?

The barriers include psychological refusal and debt on the building. But the main barrier, at least for residential property, is researching competing prices. This is solved by using a service. The same service all land lords use.

This is why there are no examples of any towns where rent is less than it was decade ago regardless of population decline. It is why there are rising numbers of working homeless in towns with rising vacancies.

It is the chief mechanism driving ever increasing rental profits which is probably why merely mentioning the existence of the service, its ubiquitous use and success draws such silent ire. Silent because of course anyone can just google for the service. It also does not match the standard narrative which no doubt annoys people in inarticulable ways.

Likelihood is a real measurable quantity with a real number attached. You can obtain it by counting the defection rate: the number who lower their rent. This number is observably zero.

Ok, so you seem to think that landlords cooperate on pricing. My reply was to the person above who seemed to think that prices may deviate from the market rate without any cooperation.

Regardless, do you have a source on the claim that housing prices never go down, even with a declining population? I'd be curious to see if they adjusted for inflation or not.

I was listing barriers namely debt and market research. The market research barrier is solved in such a way that it produces a de-facto cartel.

But indeed, "Never" is to strong a term. "Typically in the US" would be more correct.

in 2000, the average US rent was $600 and the vacancy rate was 7.8%

in 2018, the average US rent was $1400 and the vacancy rate was 7.5%

I can not list every city in the country that has lost population but I can start with two: As I mention elsewhere, Flint Michigan has lost some 20% of it's population since 2000 and rent has still risen. And searching California for cities with declining population (there are not many) the first I found, Citrus Heights CA, has had a net drop in population in the last 20yers yet rent has increased four fold.

At any rate, the down votes make it clear this information is not welcome here.

No, this is useful information. Thank you.

Landlords do not set prices. If you owned property or a rental you would know that.

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